Energy & Technology

Agricultural Emissions in the United States

The agricultural sector affects the climate system in four distinct, but interrelated, ways outlined below and explored further in the subsequent sections of this overview.

Greenhouse gas emissions associated with agriculture - Agriculture is directly responsible for 7 percent of total U.S. greenhouse gas emissions, largely from soil management (fertilizer use) and livestock; the agricultural sector is also an end user for electricity and transportation fuels.

Agriculture and carbon storage - Agriculture affects the global carbon cycle because agricultural practices and land use alter the amount of carbon stored in plant matter and soil, and consequently, the amount of carbon dioxide (CO2) in the atmosphere.

Energy and product substitution from agriculture - Biomass from the agricultural sector can be used to displace fossil fuels for energy purposes and to make a variety of bio-based products.

Agriculture and the climate system: beyond greenhouse gases - Agriculture also interacts with the climate system in an important way that is not related to greenhouse gas emissions or storage by changing the amount of heat absorbed or reflected by the earth’s surface.

Although this overview does not aim to address the wide range of observed and projected impacts of climate change on agriculture, it is important to note that agriculture will be affected in a variety of ways as temperatures rise and precipitation patterns change (see Climate Change 101: Science and Impacts). The impacts of climate change on agriculture will vary by crop, across regions, and through time.[1] Since the linkages between climate and agriculture are dynamic, the impacts of the climate on agriculture will in turn alter the way agriculture affects the climate.

Greenhouse Gas Emissions Associated with Agriculture in the United States

Direct greenhouse gas emissions from the U.S. agricultural sector account for 7 percent of total U.S. emissions (see Figure 1). Direct emissions from the U.S. agricultural sector account for 7 percent of total U.S. emissions (see Figure 1). Direct emissions from agriculture include methane (CH4) and nitrous oxide (N2O) emissions from a relatively small number of sources (see Figure 2). Distributing emissions from electricity and transportation among end-use sectors modestly increases the amount of greenhouse gas emissions attributable to the agricultural sector to roughly 7 percent of total U.S.

Direct greenhouse gas emissions from agriculture include methane (CH4) and nitrous oxide (N2O) emissions from a relatively small number of sources (see Figure 2). Distributing emissions from electricity and transportation among end-use sectors modestly increases the amount of greenhouse gas emissions attributable to the agricultural sector to roughly 7 percent of total U.S. emissions.[2]

Agricultural soil management, including the application of nitrogen-based fertilizers, accounts for more than 40 percent of all agricultural emissions. Enteric fermentation, a normal digestive process in animals that produces methane, is the second largest source (nearly 30 percent) of agricultural emissions; beef and dairy cattle account for nearly 95 percent of emissions from enteric fermentation. Livestock manure management accounts for an additional 14 percent of emissions. Other emissions sources, including rice cultivation and the field burning of agricultural residues, account for 6 percent of non-energy related direct greenhouse gas emissions from agriculture.[3]

Energy use is the fourth largest source of emissions, accounting for 10 percent of total agricultural emissions (see Figure 2). Both direct energy use in support of farming activities, such as the electricity used to power irrigation pumps and the liquid fuels for vehicles used in the fields, and indirect energy use, which includes the emissions from the production of commercial fertilizers and other energy-intensive farm inputs, produce emissions.

Agriculture and Carbon Storage

Plants, including agricultural crops, play an integral role in the global carbon cycle. The carbon cycle consists of four major stocks of carbon: the atmosphere, the oceans, the terrestrial biosphere (vegetation and soils), and sediments and rocks. Carbon moves from one stock to another at different rates through a variety of pathways. Plants, for example, convert atmospheric CO2 into a usable form of chemical energy, sugar, through photosynthesis. As the plants use the sugar’s energy, some of the carbon is released back into the atmosphere as CO2, and the rest of the carbon is used by the plant to grow new biomass. The carbon embodied by terrestrial plants can then replenish the carbon in soil, for example, through the decomposition of fallen leaves.[5]

The agricultural sector affects carbon storage in two main ways:

Land use conversion: Converting land from one use to another can result in significant changes to the amount of stored carbon; forests and wetlands generally store more carbon than grasslands, which in turn tend to store more carbon than croplands.

Land management practices: A variety of land management practices help maintain and increase the amount of stored carbon on agricultural lands. These practices include agroforestry, improved cropping systems, improved nutrient and water management, conservation tillage, water management, and maintenance of perennial crops.[6]

The U.S. Department of Agriculture classifies 62 percent of land in the contiguous 48 states as agricultural and 52 percent of land in all 50 states (see Figure 3).

Figure 3: Land Use in the Contiguous 48 States (2011)

Source: USDA Economic Research Service. Major Land Uses in the Continguous United States, 2007 (2011) http://www.ers.usda.gov/data-products/major-land-uses.aspx#25988Note: Special use is defined as rural transportation, rural parks and wildlife, defense and industrial, plus miscellaneous farm and other special uses. Other land is unclassified uses such as marshes, swamps, bare rock, deserts, tundra and other uses not estimated, classified, or inventoried.

The U.S. Environmental Protection Agency (EPA) has estimated the annual carbon fluxes associated with land use, land-use change, and forestry for the contiguous 48 states. Land-use practices and land-use change can result in either a net release of carbon stored in the plants and soil (making the system a carbon source) or a net uptake of carbon by the plants and soil (making the system a carbon sink).

For agricultural lands, specifically croplands and grasslands, the annual carbon flux values include changes to the amount of carbon stored in soils due to land management and changes in land use, as well as the CO2 emissions resulting from the application of lime and urea fertilizer. Collectively, agricultural lands in the United States act as a small carbon sink, storing more carbon than they release (see Figure 4). For comparison, forests act as a much larger carbon sink in the United States, storing about 20 times more carbon than the total carbon sink provided by all agricultural lands.[7]

Based on the emissions measured by the EPA, agricultural land use and land-use change act as a small net sink for greenhouse gas emissions. However, when greenhouse gas emissions (Figure 2) and carbon storage (Figure 4) are totaled, the sector is a net source of greenhouse gas emissions on a CO2-equivalent basis.[8]

Energy and Product Substitution from Agriculture

The agricultural sector is one source of biomass for bio-based products and energy. Bio-based products include a broad range of commercial and industrial items, excluding food and feed, that range from plastics to bedding made completely or in large part from agricultural and forestry products.[9] Agricultural biomass, which can include waste materials or dedicated energy crops, can also be used to produce electricity, heat, and liquid fuels, broadly referred to as bioenergy.[10]

Substituting biomass for fossil fuels in energy production has the potential to reduce greenhouse gas emissions. The combustion of fossil fuels adds to the atmosphere CO2 that has been stored in deep rock formations for millions of years. The combustion of biomass returns the atmospheric CO2 taken up through photosynthesis and converted into new plant material, making bio-based fuels theoretically carbon neutral. However, the full climate impact of bioenergy requires a broader assessment that accounts for the life-cycle emissions associated with the biomass, including land management practices, land use change, conversion processes and associated energy use, and transportation.[11]

In 2011, biomass (including biofuels, biomass from wood and municipal solid waste from biogenic sources, landfill gas, sludge waste, agricultural byproducts and other biomass) provided 4.5 percent of total energy consumed in the United States, or nearly half of all renewable energy (see Figure 5). For more information on biofuels, see Climate TechBook: Biofuels Overview.

Agriculture and the Climate System: Beyond Greenhouse Gases

The interface between terrestrial ecosystems and the climate system encompasses a wide range of complex interactions that includes, but is not limited to, greenhouse gas emissions and carbon storage. Agriculture also affects the amount of solar energy that the land surface absorbs or reflects. The fraction of solar energy reflected by a surface is known as the albedo; bright surfaces like ice and snow that reflect a lot of solar energy have a high albedo, while dark surfaces, like the ocean, have a low albedo and tend to absorb greater amounts of solar energy.

Albedo is important to the climate system because absorbed sunlight warms the surface and is released back into the atmosphere as heat.[12] Darker vegetation and exposed soils tend to absorb more sunlight and, therefore, release more heat into the atmosphere, producing a local warming effect. This warming can play an important role in the overall climate system.[13]

Global Context

Agricultural land, which includes cropland, managed grassland, and permanent crops, occupies about 40-50 percent of the world’s total land surface. In 2005, non-energy direct greenhouse gas emissions from agriculture accounted for 10-12 percent of total global greenhouse gas emissions from human-made sources. Agriculture accounts for 60 percent of global N2O emissions and 50 percent of CH4 emissions. A combination of population growth and changing diets has led to increased emissions of these gases from the agricultural sector since at least 1990.[14] This increase can be attributed to the increased use of nitrogen-based fertilizers and the increased number of livestock being raised, especially cattle.[15]

Population growth, changing diets, and changing standards of living will continue to affect the amount and type of food demanded. Recent years have also seen greater interest in and demand for dedicated energy crops. These trends have several possible implications on greenhouse gas emissions:

Increasing land use change to increase the amount of cropland available for food or energy crops will affect carbon storage. The effect of land use change on carbon change will depend on a variety of factors, including previous land use, land management practices, and type of crops grown. An expansion of croplands could result in an overall loss of plant and soil carbon.

Increasing crop yields will likely require more inputs, such as water and fertilizer, for a given a unit of land. Increasing agricultural inputs will result in higher emissions per unit of agricultural output because more energy will be required to produce the inputs and direct emissions from fertilizer use will increase.

Rising demand for meat and dairy products will increase methane emissions from enteric fermentation and manure production. The Intergovernmental Panel on Climate Change (IPCC) projects that methane emissions from livestock could increase 60 percent by 2030, depending on whether greenhouse gas-mitigating feeding practices and manure management are used.[16] Larger livestock populations could also result in land use change to create grazing lands.

Growing interest in the lifecycle carbon emissions of food may also change patterns of food production and consumption. Lifecycle emissions arise from agricultural inputs (including water and fertilizer), equipment for cultivating and harvesting crops, and transportation to consumers. Possible outcomes of using lifecycle analysis include more localized production—producing food close to its point of consumption—and using organic farming methods that minimize fertilizer use. Particularly in today’s globalized food market, accounting for life cycle emissions will be crucial in reducing greenhouse gas emissions associated with agriculture and livestock.

Agriculture Sector Mitigation Opportunities

The agricultural sector can contribute to climate change mitigation in a variety of ways. Mitigation efforts can reduce the direct greenhouse gas emissions from agriculture, increase carbon storage, substitute bio-based products and feedstocks for fossil fuels, and reduce the amount of heat absorbed by the earth’s surface. Some of these mitigation opportunities provide relatively straightforward solutions, but others face a variety of challenges, including the accurate measurement of greenhouse gas fluxes.

Mitigation Opportunities

Mitigation opportunities can be identified from each of the four types of interactions that agriculture has with the climate system. A wide range of options exist, but with different levels of technical feasibility, cost-effectiveness, and measurement certainty. A number of the mitigation options for the agricultural sector, including soil management practices, also bring a variety of co-benefits, such as improved water quality and reduced erosion. To date, a number of policies thought to have climate benefits have been pursued in order to achieve one or more of these co-benefits.

Reduce greenhouse gas emissions

Reduce greenhouse gas emissions from energy use: Energy-related greenhouse gas emissions from the agricultural sector can be reduced in a number of ways, including the use of more fuel-efficient machinery and the installation of on-site renewable energy systems for electricity.

More efficient fertilizer use: Increasing the efficiency of nitrogen use reduces the need for additional fertilizer inputs. This can be achieved by fertilizing during the most appropriate period for plant uptake, fertilizing below the soil surface, and balancing nitrogen fertilizers with other nutrients that can stimulate more efficient uptake. These measures can reduce N2O emissions.

Improved manure management: When manure is held in an oxygen-poor (anaerobic) environment—such as a holding tank—for an extended period of time, bacteria decompose this material and release methane as a byproduct. Reducing the moisture content and the amount of storage time are two options for reducing methane emissions from manure.

Improved rice cultivation practices: When rice paddies are flooded, the oxygen-poor (anaerobic) environment allows certain bacteria to create methane through a process called methanogenesis. Periodically draining rice paddies can inhibit this process by aerating the soil.

Increase vegetation and soil carbon stocks

Land-use changes to increase soil carbon: Reforestation and afforestation initiatives can increase the amount of biomass in a given area of land, thereby sequestering carbon in plant material.

Land management practices that increase soil carbon: A variety of land management practices can be implemented to increase soil carbon. These include the use of high-residue crops, such as sorghum, that produce a large amount of plant matter left in the field after harvest; the reduction or elimination of fallow periods between crops; the efficient use of manures, nitrogen fertilizers, and irrigation; and the use of low- or no-till practices. Importantly, local conditions will determine the best practices for a given location, and all of these practices do not increase carbon storage in all locations.

Substitute biomass feedstocks and products for fossil fuels

The use of bio-based products as fuels and product substitutes has the potential to reduce fossil fuel combustion and associated greenhouse gas emissions. However, careful life-cycle analysis is necessary to ensure that the substitution yields a net reduction of greenhouse gas emissions.

Non-greenhouse gas related climate interactions

Less attention has been given to mitigation options that do not affect greenhouse gas emissions, but a 2009 study did suggest that crops could be bred or genetically engineered to be more reflective to help reduce warming by reflecting more solar energy from the land surface.[17]

Uncertainty and Mitigation Potential

Key aspects of the agricultural sector’s climate interactions involve complex biological processes. These processes continue to be studied by scientists to fill gaps in our understanding of how these processes work and to reduce the uncertainty associated with current data on greenhouse gas fluxes from agricultural systems. Although the agricultural sector is sometimes identified as having a potentially large role in mitigating climate change, especially by increasing carbon storage in developing countries,[18] further scientific advances will be necessary for the agricultural sector to achieve its full mitigation potential.

Estimates of agriculture’s mitigation potential in the United States vary for different practices. For example, emissions of N2O could be reduced by 30 to 40 percent with improved fertilization practices. Methane (CH4) emissions could be reduced by 20 to 40 percent by improving livestock and methane management. Croplands could store up to 83 MMT of carbon per year, equivalent to about 1 percent of total U.S. greenhouse gas emissions, through widespread adoption of best management practices.[19]

C2ES Work in Agricultural Sector

Our work at C2ES covers a wide variety of agriculture-related topics, including climate policy and how it interacts with the sector, low-carbon technology status and outlook, and agricultural practice innovation. We track and inform policymaking at the state, federal, and regional levels, collaborate on papers and briefs, blog about current issues, and educate policymakers and others with up-to-date online resources about important developments in the sector and those relevant to the sector.

Tracking policy - We track policy progress at the state, federal, and international level. Our state maps provide information about which states have implemented policies that promote the use of bio-based products and feedstocks as substitutes for fossil fuels. We also track and analyze policy at the national level, including what is happening in Congressand the Executive Branch.

Research - We produce research, including reports, white papers, and briefs, on climate and clean energy issues.

Climate Compass Blog - Our blog includes posts about current issues related to agriculture, and you can view relevant posts here.

Climate Techbook - The agriculture section of the Climate Techbook provides an overview of the sector as well as briefs describing technologies and practices related to agriculture and GHG emissions. Below is a list of the Techbook factsheets that pertain to agriculture.

[4] One million metric ton is equal to one teragram. For reference, one million metric ton of CO2e is equal to 280,000 new cars each being driven 12,500 miles or 90 minutes of U.S. energy consumption or 1 day of U.S. energy emissions from lighting buildings, see U.S. Department of Energy (DOE). 2008 Buildings Energy Data Book. Prepared for U.S. Department of Energy Office of Energy Efficiency and Renewable Energy by D&R International, Ltd. Silver Spring, MD, 2008. http://buildingsdatabook.eren.doe.gov/.

[8] The emissions of a gas, by weight, multiplied by its "global warming potential." Global warming potential is a system of multipliers devised to enable warming effects of different gases to be compared. The cumulative warming effect, over a specified time period, of an emission of a mass unit of CO2 is assigned the value of 1. Effects of emissions of a mass unit of non-CO2 greenhouse gases are estimated as multiples. For example, over the next 100 years, a gram of methane (CH4) in the atmosphere is currently estimated as having 23 times the warming effect as a gram of carbon dioxide; methane's 100-year GWP is thus 23. Estimates of GWP vary depending on the time-scale considered (e.g., 20-, 50-, or 100-year GWP) because the effects of some greenhouse gases are more persistent than others.

Residential and Commercial Emissions in the United States

Greenhouse gas emissions data can be reported either by economic sector, which includes electric power generation as a separate sector, or by end-use sector, which distributes the emissions from electricity generation across the economic sectors where the electricity is used. The residential and commercial sectors are large consumers of electricity, so it is appropriate to address both emissions from direct sources and electricity end-use for these sectors.

Direct emissions

Direct emissions from the residential and commercial sectors respectively account for 5.6 and 5.4 percent of total greenhouse gas emissions in the United States (see Figure 1).

Ninety-three percent of the residential sector’s direct greenhouse gas emissions come from the combustion of fossil fuels, primarily for heating and cooking. Less than 7 percent of direct emissions come from the substitution of ozone depleting substances and other minor sources.[1] In the commercial sector, nearly 60 percent of direct emissions come from on-site fossil fuel combustion. Other sources of direct commercial emissions include landfills, wastewater treatment, the substitution of ozone depleting substances, and other minor sources (see Figure 2).[2]

Figure 2: Direct Emissions of Greenhouse Gases in the U.S. Commercial Sector (2010)

End-use emissions

U.S. electricity sales are split among the residential, commercial, and industrial sectors, with the residential and commercial sectors accounting for 39 and 35 percent of sales, respectively.(see Figure 3).

Figure 3: Retail Sales of Electricity to Ultimate Customers, Total by End-Use Sector(2010)

When emissions from electricity generation are attributed to end-use sectors, the residential and commercial sectors are responsible for 18 and 17 percent of total U.S. emissions, respectively (see Figure 4). Electricity-related geenhouse gas emissions account for 70 percent of total residential emissions and 67 percent of total commercial emissions.

Buildings: Key Drivers of Residential and Commercial Emissions

Emissions from the residential and commercial sectors, including both direct emissions and end-use electricity consumption, can largely be traced to energy use in buildings. Diverse factors determine how much energy buildings consume; these include the size of the building, the design and materials used, and the kinds of lighting and appliances installed.

Building Trends for Greenhouse Gas Emissions, Size, and Energy Use Intensity

Total greenhouse gas emissions, including both direct and end-use emissions, from residential and commercial buildings in the United States accounted for about 40 percent of total U.S. carbon dioxide (CO2) emissions and 7 percent of global CO2 emissions in 2010.[3] Greenhouse gas emissions attributable to buildings have been steadily increasing; in recent decades, emissions from the on-site combustion of fossil fuels have remained relatively steady while electricity consumption has increased (see Figure 5).

Figure 5: CO2 Emissions for U.S. Residential and Commercial Buildings[4]

Greenhouse gas emissions from buildings have increased as building size has increased. In the residential sector, the number of homes and the size of these homes have been increasing over time.[5] As homes grow larger, more energy is generally needed for heating, cooling, and lighting. Over time, homes also have added more appliances and consumer electronics.

Even as residential energy use has increased overall, the amount of energy used per square foot of residential buildings, a measure of energy intensity, has decreased, due to the increased efficiency of consumer appliances and recent regional building trends, such as improved residential building energy codes.[6] (see Figure 6) Energy intensity indicators are used to compare energy use in buildings through time. These indicators are used to examine energy-use trends in the different types of buildings in the residential and commercial sectors. They show how the amount of energy used per unit of output or activity has changed over time. Using less energy per unit of output reduces energy intensity; using more energy per unit increases the energy intensity. A weather factor is used to take into account the impacts of annual weather variation on energy consumption.[7]

Source: DOE, Energy Efficiency and Renewable Energy (EERE), “Trend Data: Residential Buildings Sector,” updated 14 May 2008. Note: The indicators on this chart are based on an Energy Use Index that is calibrated to 1985 levels.

In the commercial sector, both energy use and energy intensity have generally increased in recent decades. The general rise in energy intensity since 1985 has shown, however, a modest decline in recent years (see Figure 7). Commercial buildings have shown steady growth in size in recent years, as reflected by the increase in average floor space through time.

Energy End Use in Buildings

In the residential sector, space heating and cooling accounts for 43 percent of total primary energy use. Therefore, total energy demand from this sector is fairly sensitive to weather and varies considerably by region in a single year and over time in a given location. Other significant end uses of energy in the residential sector include water heating, lighting, refrigeration, electronics, wet cleaning and cooking (see Figure 8).

In the commercial sector, space heating, ventilation and space cooling accounts for 43 percent of total primary energy use and lighting accounts for one-fifth. Refrigeration, water heating, electronics, computers, and cooking also use significant quantities of energy in the commercial sector (see Figure 9). The commercial sector encompasses a variety of different building types, including schools, restaurants, hotels, office buildings, banks, and stadiums. Different building types have very different energy needs and energy intensities.

Global Context

On a global scale, energy use and greenhouse gas emissions data for the residential and commercial sectors can be difficult to quantify. Globally, the quantity of energy use attributed to buildings, as a proxy for the residential and commercial sectors, varies by country and climate. Energy consumption levels and primary fuel types of buildings in a specific country depend on economic and social indicators, such as national income and level of urbanization. Some key trends observed include:

In general, developed countries consume more energy per capita than developing countries; developed countries tend to have bigger building sizes for comparable building functions, and they tend to use more appliances and other energy-using equipment than developing countries.

Urban areas in developed countries use less energy per capita than rural areas; this is because of , district heating in higher-density areas, decreased transportation-related energy consumption, and other factors. However, the opposite effect can be seen in many developing countries where energy useis higher in cities than in rural areas because residents often have higher incomes and greater access to energy services.[8]

In some countries, grid-connected power remains unavailable or unaffordable for households. In these areas, which include large portions of sub-Saharan Africa, as well as parts of India and China, biomass and coal are often the primary fuels for heating and cooking.[9] This has important implications both for global greenhouse gas emissions and development goals, including:

Global data on GHG emissions often do not account for emissions from biomass that is collected and burned locally. Household-level combustion of biomass and coal are estimated to account for about 10 percent of global energy use and 13 percent of direct carbon emissions.[10]

The use of woody biomass, unless sustainably managed, can lead to widespread deforestation. Forests play important roles as local resources and as global carbon sinks.

Indoor combustion of biomass and coal is a significant health concern; high rates of respiratory illness have been documented in areas that predominantly use biomass or coal for heating and cooking. Reducing GHG emissions through appropriate technology advances, energy efficiency improvements, and the use of alternative fuels will have important health co-benefits.

Commercial energy intensity in developed countries, the energy use per dollar of income as measured by GDP, is currently almost twice that of developing countries. Commercial buildings’ energy consumption is projected to be the fastest-growing end-use sector for energy in developing countries.[11] Economic growth in developing countries will likely lead to increased global demand for energy, and, without energy efficient products and practices, could lead to substantially higher global energy consumption and GHG emissions.

Residential and Commercial Sector Mitigation Opportunities

Reducing emissions from the residential and commercial sectors can be done in a variety of ways and on a number of scales:

Addressing landfills

Landfill waste can be reduced (thereby lowering the volume of decomposing material that produces methane, a powerful greenhouse gas) or harnessed as an energy source. Methane-capture systems in landfills prevent greenhouse gases from being released into the atmosphere.

Reducing embodied energy in building materials

Embodied energy refers to the energy used to extract, manufacture, transport, install, and dispose of building materials. Choosing low carbon materials—such as local materials, materials that sequester carbon, and products manufactured at efficient industrial facilities reduces emissions.

Improving building design and construction

Building designs and construction techniques can maximize the use of natural light and ventilation, which minimizes the need for artificial light and HVAC equipment. Using building shading techniques, installing windows to minimize or maximize solar intake (depending on the region), and properly insulating against unwanted air flow between indoor and outdoor spaces improve energy use. Many other options are available and “green” builders are continually creating innovative ways to maximize efficiency in building spaces.

Following conservation guidelines and making personal choices to reduce the use of appliances, artificial lighting, and HVAC equipment (for example, by shutting them off when they are not in use) will reduce energy use. Also, opting for smaller residential and commercial spaces can reduce the energy needed for building construction and operation.

C2ES Work in the Residential & Commercial Sector

Our work at C2ES focuses on all types of commercial and residential building topics, including policy and low-carbon building technologies. We track state and federal building and efficiency policies, blog about building-related energy issues, and create and maintain a current online resource of building technologies.

Climate Techbook – The Residential & Commercial section of the Climate Techbook provides an overview of these sectors and decriptions of technologies related to improving building energy efficiency. Below is a list of all the buildings-related Techbook factsheets.

[1] Hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs) are used as alternatives to several classes of ozone-depleting substances (ODSs) that are being phased out under the terms of the Montreal Protocol and the Clean Air Act Amendments of 1990. Ozone depleting substances—chlorofluorocarbons (CFCs), halons, carbon tetrachloride, methyl chloroform, and hydrochlorofluorocarbons (HCFCs)—are used in a variety of industrial applications including refrigeration and air conditioning equipment, solvent cleaning, foam production, sterilization, fire extinguishing, and aerosols. Although HFCs and PFCs are not harmful to the stratospheric ozone layer, they are potent greenhouse gases. Environmental Protection Agency (EPA), Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2010, 2012. http://www.epa.gov/climatechange/emissions/usinventoryreport.html

[4] One million metric ton is equal to one teragram. For reference, one million metric ton of CO2e is equal to 280,000 new cars each being driven 12,500 miles or 90 minutes of U.S. energy consumption or 1 day of U.S. energy emissions from lighting buildings, see DOE, 2010 Buildings Energy Data Book, 2011.

[7] The weather factor is included to show variations in weather conditions that may have had an impact on energy use in a given year. Data that is weather-adjusted shows how the indicator would have performed under “normal” weather conditions; for example, data in years with extreme weather (such as unusually cool weather that would increase energy consumption for indoor heating) is adjusted to show performance without the influence of weather. As the figure indicates, weather conditions have remained fairly stable while other indicators have risen; this indicates that weather conditions do not have as much of an impact on energy use as other factors.

A snapshot of the fuels used in the United States for electricity shows that coal-fueled generation provides a little more than 39 percent of all electricity, down from nearly 50 percent in 2006. Filling this gap, natural gas now provides more than a quarter of all electricity, and renewables, including wind and large hydroelectric power, provide about 13 percent. Nuclear power continues to provide around one-fifth of net generation (see Figure 2).

The greenhouse gas emissions associated with different sources of electricity vary significantly, depending on the carbon content of the fuel being used. Carbon dioxide makes up almost 99 percent of the greenhouse gas emissions from electricity generation, and carbon dioxide emissions from coal combustion account for almost 80 percent of total electricity generation-related emissions. The combustion of natural gas and petroleum account for most of the remaining carbon dioxide emissions (see Figure 3). Electricity generation-related greenhouse gas emissions have decreased more than 16 percent since 2007.

Key Generation Technologies in Use

Steam Turbine

Coal-fueled electricity is generated almost exclusively by pulverized coal (PC) power plants. These plants crush coal into a fine powder and then burn it in a boiler to heat water and produce steam. The steam is then used to spin one or more turbines to generate electricity. Natural gas, oil or biomass can be used as a fuel in conjunction with steam turbine technology. Similarly, in a nuclear reactor, fission is used to heat water, which directly or indirectly produces steam to drive a turbine and generate electricity. Large coal and nuclear steam units on the order of 500 – 1000 MW or greater are typically used to provide baseload [1] generation, meaning that they supply electricity nearly continuously.

Combustion (or single-cycle) turbines are another widespread power generation technology. In a combustion turbine, compressed air and burning fuel (diesel, natural gas, propane, kerosene, biogas, etc) are ignited in a combustion chamber. The resulting high temperature, high velocity gas flow is directed at turbine blades that spin the turbine and common shaft, which drives the air compressor and the electric power generator. Combustion turbine plants are typically operated to meet peak[2] load demand, as they are able to be switched on relatively quickly. Newer turbines are able to be switched on and off frequently, so they can provide a firm backup to intermittent wind and solar on the power grid if needed. The typical size is 100 – 400 MW.

A basic combined cycle power plant combines a single gas (combustion) turbine and a single steam unit all in one, although there are other possible configurations. As combustion turbines became more advanced in the 1950s, they began to operate at ever higher temperatures, which created a significant amount of exhaust heat. In a combined-cycle power plant, this waste heat is captured and used to boil water for a steam turbine generator, thereby creating additional generation capacity. Historically, they have been used as intermediate[3] power plants, generally supporting higher electricity use during daytime hours. However, newer natural gas combined cycle plants are now providing baseload support.

The primary end uses of electricity vary by sector. In the residential sector, space heating, water heating, space cooling and lighting together account for more than half of household electricity use (see Figure 8). In the commercial sector, lighting is the largest electricity end use (see Figure 9). In the manufacturing sector, half of all electricity use is for powering electric motors (see Figure 10).

Historical Trends

Since 1949, U.S. electricity generation has grown dramatically, with an average annual growth rate of 4.2 percent (see Figure 11). Since 2000, however, U.S. electricity generation has grown at an average rate of less than 1 percent. During this time, generation from natural gas has increased at an average annual rate of 4.9 percent, and non-hydro renewable generation has increased at an average annual growth rate of 9.2 percent. Coal generation has decreased at an average annual rate of 1.6 percent, and in 2013 fell below the level generated in 1990.

From 1990 to 2013, U.S. electricity generation-related greenhouse gas emissions grew an average of 0.5 percent per year, with a general decrease in annual emissions over the past several years (see Figure 12). During this time, the proportion of electricity generation-related greenhouse gas emissions from coal combustion, which peaked in 1996 at around 85 percent, has fallen to 77 percent in 2013. The share of emissions from natural gas combustion has grown from around 9 percent in 1990 to just over 21 percent in 2013, and the share of emissions from petroleum has fallen from around 5 percent to a little more than 1 percent over the same period.

From 1990 to 2013, CO2 emissions from electricity generation, electricity generation, and real gross domestic product (GDP) grew at annual average rates of 0.5, 1.3, and 2.5 percent, respectively (see Figure 13). This illustrates that the U.S. economy grew less electricity-intensive per value of output while the electricity generation also became less carbon intensive over this period.

Global Context

Globally, CO2 is the most abundant anthropogenic greenhouse gas, accounting for 76 percent of total anthropogenic greenhouse gas emissions in 2008; the CO2 emissions from fossil fuel use alone account for 62 percent of total greenhouse gas emissions.[4],[5] Electricity generation is by far the largest single source of CO2 emissions (see Figure 14).

The generation profile of global electricity production is similar to that of the United States, with coal being the largest energy source for electricity production (see Figure 15). Globally, 5.1 percent of electricity is generated by oil, whereas in the United States oil makes up less than 1 percent. Also, hydropower makes up a larger share of global electricity generation, while the United States gets a greater proportion of its electric power from nuclear. The United States contributes more than one-fifth of global carbon dioxide emissions from electricity and heat production; China and the United States are the largest single emitters (see Figure 16).

C2ES Work on Electricity

Over the past 20 years U.S. electricity generation has become less carbon intensive, and the U.S. economy has grown less electricity-intensive. Further mitigating greenhouse gas emissions from electricity generation will require a comprehensive approach, including lower-, low- and zero-carbon electricity generation technologies, incorporating renewable energy, switching to lower-emitting fuels, coal or gas with carbon capture and storage, and nuclear power, as well as energy efficiency and conservation. Several types of policies can be employed to promote these mitigation techniques, including emissions pricing (e.g. carbon tax or cap and trade), electricity portfolio standards (also known as clean energy standards), emission performance standards, financial incentives for clean energy deployment and energy efficiency, and research and development to support innovative technologies.

Our work at C2ES covers all types of electricity-related topics, including policy and regulation, low-carbon technology status and outlook, and technology innovation. We track and inform policymaking at the state, federal, and regional levels, collaborate on research for papers and briefs, blog about current energy issues, and educate policymakers and others with up-to-date online resources about important low-carbon technologies.

Tracking policy - We track policy progress at the state, federal, and international level. Our state maps provide information about which states have implemented policies that promote low-carbon electricity technologies and energy efficiency. We also track and analyze policy at the national level, including what is happening in Congress and the Executive Branch.

[1] Baseload generation describes electric power plants that typically run all day and night, seven days a week.

[2] Peak generation describes electric power plants that run only during times of the highest demand. For example, high demand can occur in the morning when many consumers are waking up and switching on electric appliances or on hot summer afternoons when many air conditioners are running simultaneously.

[3] Intermediate generation describes electric power plants that typically run only during daytime hours to support higher use of electrical appliances, computers, lighting and so on.

Greenhouse gas emissions data can be reported either by economic sector, which includes electric power generation as a separate sector, or by end-use sector, which distributes the emissions from electricity generation across the economic sectors where the electricity is used. The industrial sector encompasses a wide range of activities (manufacturing, agriculture, mining and construction), including all facilities and equipment used for producing, processing, or assembling goods.[1] Greenhouse gas emissions are produced from diverse processes, including the combustion of fossil fuels for heat and power, non-energy use of fossil fuels, and numerous industrial processes. The industrial sector is a large consumer of centrally generated electricity (26 percent of total U.S. electricity sales), so it is appropriate to address both emissions from direct sources and electricity end use for this sector. When electric power sector emissions are assigned to the end-use sectors that consume the electricity, the industrial sector accounts for 28 percent of total U.S. greenhouse gas emissions.

Direct emissions

Direct emissions from the industrial sector account for 20 percent of total greenhouse gas emissions in the United States (see Figure 1).

Industrial process emissions include numerous greenhouse gases, including several gases with high global warming potentials, like hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF6). Global warming potential (GWP) is a metric used to compare the warming effects of different gases. Over a 100-year time horizon, carbon dioxide (CO2) is assumed to have a GWP of one. In comparison, SF6 has a GWP of 23,900, which means that over 100 years one ton of SF6 will have the same effect as 23,900 tons of CO2 (see Table 1).[5]

The industrial sector is responsible for 25 percent of total non-CO2 emissions, specifically 40 percent of total U.S. methane (CH4), 7 percent of nitrous oxide (N2O), and 19 percent of other (HFCs, PFCs and SF6) emissions.[6]

Between 1990 and 2012, total industrial process emissions increased a little less than 6 percent, as emission decreases from some sources have been offset by increases from other sources. Notably, HFCs have increased more than 300 percent during this time period as a result of phasing out ozone depleting substances, such as chlorofluorocarbons (CFCs) (see Figure 3).[7] Also, the economic downturn and slow recovery (2008 – 12) has reduced CO2 emissions from cement production more than 23 percent below their 2006 peak.[8]

When greenhouse gas emissions from electricity generation are distributed across the end-use sectors, the industrial sector is the second largest source of greenhouse gas emissions, responsible for almost 28 percent of total U.S. emissions (see Figure 5). Emissions from the use of electricity generated off-site (“electricity-related emissions” in the graph below) are also called indirect emissions to distinguish them from the direct emissions released on site.

Relative to the residential and commercial sectors, a smaller percentage of the industrial sector’s greenhouse gas emissions come from electricity use. The industrial sector relies less on purchased electricity in part because of the on-site production of heat and power, also known as cogeneration or combined heat and power (CHP).

Industrial Emission Sources and Types

The industrial sector encompasses a diverse collection of businesses that have a variety of energy and feedstock needs to create products that range from paper to gasoline to pharmaceuticals. While greenhouse gas emissions from the electricity sector depend largely on the type of fuel used, and emissions from the residential and commercial sectors come largely from buildings, similar generalizations cannot be made about the industrial sector. Examining industrial emissions on an industry-by-industry basis shows that the magnitude of emissions associated with different industries varies significantly (see Figure 6).

Figure 6 also shows the relative importance of different types of emissions to individual industries. For example, five industries (oil and gas, chemicals, iron and steel, mining, and cement) produce the majority of non-combustion-related direct emissions. Similarly, oil and gas, chemicals, construction, forest products, and food and beverages produce large amounts of greenhouse gas emissions from on-site fossil fuel combustion.

Certain industries are termed energy-intensive because they require large energy inputs per unit of output or activity. The largest energy-consuming industries in the United States are bulk chemicals, oil and gas, steel, paper, and food products; these five industries account for 60 percent of industrial energy use, but only 22 percent of the value of the products. Other energy-intensive industries include glass, cement, and aluminum. In general, energy-intensive industries are growing more slowly in the United States than industries with lower energy intensities.[10]

Historical Trends

Total industrial emissions in the United States have gradually declined over the past decade in both absolute and relative terms (see Figure 7). From 1990 to 2012 U.S. industrial output increased by 55 percent, while CO2 emissions from industrial processes decreased by a little more than 23 percent. Several factors have contributed to this reduction, including development of new methods (less carbon intensive), fuel switching, increased efficiency, and changes to the U.S. economy from a more manufacturing-based to a more service-based economy and from more energy-intensive industries to less energy-intensive industries. Over time, the proportion of industrial greenhouse gas emissions from electricity use has increased, while the proportion of greenhouse gases from direct emissions has decreased.[11]

The industrial sector is the largest end-user of energy in the United States. Since 1973, total energy consumption has increased across all end-use sectors except the industrial sector (see Figure 8). This is due to three primary factors: a shift away from manufacturing and towards a more service-oriented economy; a move towards less energy-intensive manufacturing, and energy efficiency in the industrial sector.[12]

Global Context

At the global level, the industrial sector is a key energy consumer and greenhouse gas producer. Manufacturing industries account for more than one-third of total energy consumption and 37 percent of CO2 emissions from energy use.[13] At the global level, data on non-CO2 gases and non-combustion CO2 emissions have higher levels of uncertainty.[14] A small number of industries account for a large percentage of global industrial emissions. In 2007, five industries (chemicals and petrochemicals, iron and steel, non-metallic minerals, pulp and paper, and non-ferrous metals) accounted for 50 percent of total industrial energy use.[15]

Energy efficiency in energy-intensive manufacturing industries has increased, with Japan and Korea generally achieving the highest levels of energy efficiency.

Cost-effective greenhouse gas mitigation opportunities exist for the industrial sector but are currently under-utilized in both developed and developing countries. The adoption of best practice commercial technologies by manufacturing industries could reduce industrial sector CO2 emissions by 19-32 percent annually by, for example, improving the efficiency of motor systems.[16]

Developed economies usually have a more energy-efficient industrial sector, and a larger fraction of their output comes from non-energy-intensive sectors than is the case for developing economies. On average, industrial energy intensity, which is the industrial sector’s energy consumption per dollar of economic output, is double in developing countries. Energy-intensive manufacturing industries are growing in many developing countries. Industrial energy use frequently accounts for a larger portion of total energy consumption in these countries; for example, an estimated 75 percent of delivered energy in China was used by the industrial sector in 2007.[18]

In 2007 the industrial sector comprised 51 percent of global energy use, and is projected to grow at an annual rate of 1.3 percent.[19]

Industrial Sector Mitigation Opportunities

There is a diverse portfolio of options for mitigating greenhouse gas emissions from the industrial sector, including energy efficiency, fuel switching, combined heat and power, renewable energy sources, and the more efficient use and recycling of materials. The diverse opportunities for reducing emissions from the industrial sector can be broken down into three broad categories:[20]

Sector-wide options

Some mitigation options can be used across many different industries, for example energy efficiency improvements for cross-cutting technologies, such as electric motor systems, can yield benefits across diverse sub-sectors. Other sector-wide mitigation options include the use of fuel switching, combined heat and power, renewable energy sources, more efficient electricity use, more efficient use of materials and materials recycling, and carbon capture and storage.

Process-specific options

Certain mitigation opportunities come from improvements to specific processes and are not applicable across the entire sector. For energy-intensive industries, process improvements can reduce energy demand and, therefore, greenhouse gas emissions and energy costs. Other improvements can reduce emissions of non-CO2 gases with high global warming potentials.

Case studies can help illuminate the effectiveness of these process-specific options. For example, Alcoa’s aluminum smelters collectively reduced their emissions of perfluorocarbons (PFCs) from anode effects, which occur when a particular step in the smelting process is interrupted, by more than 1.1 million tons in 2008.[21]

Operating procedures

A variety of mitigation opportunities can be achieved through improvements to standard operating procedures. These options can include making optimal use of currently available technologies, such as improving insulation and reducing air leaks in furnaces.

A variety of public and private efforts have been developed to help reduce industrial greenhouse gas emissions, energy use, or energy intensity. Some of these programs include:

A variety of programs to reduce gases with high global warming potentials, including perfluorocarbons (PFCs), hydrofluorocarbons (HFCs), and sulfur hexafluoride (SF6). http://www.epa.gov/highgwp/voluntary.html

C2ES Work in the Industrial Sector

At C2ES we work on several issues related to climate change and the industrial sector, including emissions reduction policy, energy efficiency, and adaptation. We track and inform policymakers about pragmatic policy options at the state, federal, and international level, collaborate on white papers and reports, blog about current issues impacting the industrial sector, and keep up-to-date online resources on innovative technologies.

Tracking Policy - We keep track of state, federal, and international policy that will impact the industrial sector. Our state maps have information about which states have adopted various GHG mitigation policies. We also track and analyze federal policy, including what is happening in Congress and the Executive Branch.

Climate Compass Blog - Our blog includes entries about current perspectives on GHG emissions from Industry, and can be viewed here.

Climate Techbook - The industrial section of the Climate Techbook includes an overview of GHG emissions from the industrial sector as well as technologies that can be used to reduce those emissions. Below is a list of the Techbook factsheets that pertain to the industrial sector.

[4] One million metric ton is equal to one teragram. For reference, one million metric ton of CO2e is equal to 280,000 new cars each being driven 12,500 miles or 90 minutes of U.S. energy consumption or 1 day of U.S. energy emissions from lighting buildings, see U.S. Department of Energy (DOE), 2009 Buildings Energy Data Book. Prepared for U.S. Department of Energy Office of Energy Efficiency and Renewable Energy by D&R International, Ltd. Silver Spring, MD. 2009. http://buildingsdatabook.eren.doe.gov

[5] Global warming potential is a system of multipliers devised to enable warming effects of different gases to be compared. The cumulative warming effect, over a specified time period, of an emission of a mass unit of CO2 is assigned the value of 1. Effects of emissions of a mass unit of non-CO2 greenhouse gases are estimated as multiples. For example, over the next 100 years, a gram of methane (CH4) in the atmosphere is currently estimated as having 23 times the warming effect as a gram of carbon dioxide; methane's 100-year GWP is thus 23. Estimates of GWP vary depending on the time-scale considered (e.g., 20-, 50-, or 100-year GWP) because the effects of some GHGs are more persistent than others.

U.S. Emissions

More than one-quarter of total U.S. greenhouse gas emissions come from the transportation sector (see Figure 1), making transportation the second largest source of greenhouse gas emissions in the United States after the electric power sector.

The transportation sector consists of passenger vehicles (a category including both passenger cars and light-duty trucks), medium- and heavy-duty trucks, buses, and rail, marine, and air transport. Of the various transportation modes, passenger vehicles consume the most energy (see Figure 2). Greenhouse gas emissions mirror energy use by each mode, because all modes use petroleum fuels with similar carbon contents and thus greenhouse gas emissions.

The vast majority of transportation emissions (95 percent) are composed of carbon dioxide (CO2), which is released during fossil fuel combustion. An additional one percent of total transportation GHG emissions come from methane (CH4) and nitrous oxides (N2O), emissions also associated with fossil fuel combustion. The leakage of hydrofluorocarbons (HFCs) from vehicle air conditioning systems is responsible for the remaining four percent of transportation GHG emissions. Transportation sources also emit hydrocarbons (which are ozone precursors), carbon monoxide (CO), and aerosols. These substances are not counted as greenhouse gases in transportation emissions inventories but are believed to have an indirect effect on global warming, although their impact has not been quantified with certainty.[1]

Factors Affecting Transportation Emissions

Transportation energy use and emissions are determined by four interrelated but distinct factors: the type of fuels or energy sources, the vehicles, the distance traveled, and the overall system infrastructure.

Fuel Types and Energy Sources

The transportation sector is the largest consumer of petroleum-based fuels in the United States. Importantly, transportation accounts for about 70 percent of U.S. oil consumption, which greatly affects U.S. energy security.

Figure 3: Petroleum and Other Liquids Production and Consumption, 1970–2013.

Nearly all fossil fuel energy consumption in the transportation sector is from petroleum-based fuels (92 percent), with a small amount from renewable sources (5 percent) and natural gas (3 percent).[2] There are several types of petroleum fuels used for transportation. Table 1 lists the major petroleum-based transportation fuels and the volume consumed in the United States in 2013.

Petroleum fuels are supported by an extensive and well-functioning infrastructure and have the benefit of high energy density, low cost, and a demonstrated ability to adapt to a range of operating conditions.

The production and consumption of biofuels has increased significantly since 2005, due to the state and federal renewable fuel standards, which mandate minimum annual consumption levels of ethanol and biodiesel, the two renewable biofuels. Ethanol is an alcohol produced from crops such as corn, vegetable waste, wheat, and others; it is usually combined with gasoline to increase octane levels and more efficient fuel utilization.[3] Biodiesel is produced from natural oils like soybean oil and functions only in diesel engines.[4] In 2013, ethanol (4 percent) and biodiesel (0.7 percent) made up nearly five percent of the total primary energy consumed in the transportation sector.[5]

Vehicle Efficiency

Over the last 35 years, the fuel economy (miles per gallon, mpg) of new passenger vehicles in the United States has improved significantly, increasing by more than 50 percent. Until very recently, most of the gains occurred in the early years of fuel economy regulation under the Corporate Average Fuel Economy (CAFE) program. Fuel economy improvements were nearly stagnant from the late 1980s to the early 2000s. Over this period, the technical efficiency (amount of energy needed to move a given vehicle mass) of light-duty vehicles improved, although fuel economy (the amount of gasoline consumed per mile traveled) remained unchanged, as consumer preferences shifted to larger, heavier, and more powerful vehicles. Fuel economy standard for light trucks were increased slightly in 2003, and recent federal vehicle standards adopted in 2010 and 2012 are expected to raise average fuel economy as high as 54.5 mpg for model year 2025.

Transportation modes other than passenger vehicles also have efficiency improvement opportunities. For instance, aircraft energy intensity has historically improved at an average rate of 1.2-2.2 percent per year,[6] although aircraft energy intensity steadily plateaued through the 1990s and early 2000s due to both historically low fuel prices and a tripling in the average age of aircraft and engine production lines since 1989.[7] In addition, federal vehicle standards for medium- and heavy-duty vehicles were adopted in 2011, and should improve fuel efficiency significantly.

The third factor that affects transportation emissions is the amount of vehicle use and distance traveled. Transportation demand is influenced by the geographic distribution of people and places, especially the density of development and zoning. Over the past 50 years, on-road vehicle miles traveled (VMT) increased steadily (Figure 5). Because of high fuel costs and slowing economic growth, VMT decreased in 2008. However, in 2006, the absolute number of VMT in the United States peaked, while the distance driven per person and per licensed driver peaked in 2004. The decline of these indicators prior to the 2008 recession were likely the result of non-economic factors such as increased use of public transportation, increases in telecommuting, an aging population (decreases in driving by ederly) and increased urbanization. Economic and non-economic factors contributing to the persistence of the flat absolute number of VMT in the post-recession period continue to be studied.

The absolute growth in distance traveled for modes has been similar. The use of all transportation modes (particularly freight transport and air travel) is still projected to grow rapidly in the future.

The overall operation of the transportation system also plays an important role in GHG emissions. For example, congestion results when transportation demand exceeds capacity and poses a challenge for almost all modes of transportation, from on-road and highway transport, air, and rail. Shifting travel to other modes can reduce congestion, as can electronic signaling and other measures to smooth traffic flows. Reducing congestion has the benefit of lowering fuel consumption and GHG emissions by decreasing the time spent idling. For freight (via rail, truck, and ship) and air traffic, system improvements that allow vehicles to take more direct routes from origin to destination can reduce energy use and emissions.

Global Context

Transportation activity is expected to grow significantly in all countries of the next 25 years. Over the next two decades, vehicle ownership is expected to double worldwide, with most of the increase occurring in non-OECD countries. The U.S. Energy Information Administration projects that non-OECD transportation energy use will increase by an average of 2.8 percent per year from 2010 to 2040, compared to an average decrease of 0.3 percent per year for OECD countries.[8] Figure 6 shows projected worldwide energy consumption in the transportation sector.

Transportation Sector GHG Mitigation Opportunities

Reducing GHG emissions from transportation will require a systematic approach to address the four interdependent yet distinct components of the sector.

On the fuels side, transitioning to low-carbon energy sources, such as advanced biofuels or electricity produced from renewable sources, can directly reduce the carbon emissions from fuel consumption.

Significantly more efficient transportation equipment is needed to complement the transition to low-carbon fuel sources. Alternative vehicle designs include flexible fuel vehicles that can run on a mix of biofuels and petroleum-based fuels or are powered by electricity and stored on-board in batteries or by hydrogen fuel cells.

Vehicle travel demand is affected by a number of factors. Changing land use patterns and increasing alternative travel options, such as biking, walking or rail, can reduce the use of more energy-intensive modes of transportation.

Increasing the efficiency of the transportation system would require both improving accessibility to and performance of the various modes of transportation and using more efficient ones. Advanced traffic monitoring and signaling can reduce congestion and improve the overall efficiency of the transportation system.

A strategy to reduce GHG emissions from the transportation sector will need to take into account the potential efficiency improvements for each mode of transportation and determine the appropriate reduction strategy for each. Policies that facilitate the adoption of low-carbon technologies and align infrastructure development and land use planning with GHG reduction goals can lead to further GHG reductions in these areas.

Several studies have analyzed the most cost-effective approach to emission reductions in transportation. Some of these studies include:

C2ES Work on Transportation

Achieving emission reductions and oil savings from the transportation sector requires a multi-pronged approach that includes improving vehicle efficiency, lowering the carbon content of fuels, reducing vehicle miles traveled, and improving the efficiency of the overall transportation system.

At C2ES, we focus on all aspects of transportation from improving vehicle technology to the benefits of land-use planning. We produce cutting-edge research; track policy progress at the state, federal, and international level; blog on current transportation issues; and create and maintain an online resource of transportation technology.

Convening Stakeholders - We've run a multi-year stakeholder dialogue to help enable a national electric vehicle market in the United States. The PEV Dialogue Initiative is a one-of-a-kind effort aimed at identifying policies and actions by public and private stakeholders to accelerate the deployment of electric vehicles.

Climate TechBook - The transportation section of the Climate TechBook introduces different modes of transportation along with policies to help mitigate GHG emissions and save oil. Below is a list of all the transportation-related factsheets within the TechBook.

Statement of Bob PerciasepePresident, Center for Climate and Energy Solutions

December 6, 2016

On Google's announcement that it will power its operations with 100 percent renewable energy:

We congratulate Google on achieving its goal of powering its global operations with 100 percent renewable energy.

Google’s achievement is further evidence of the continuing momentum of America’s clean-energy transition. Companies like Google are investing billions of dollars in clean energy and efficiency because it makes sound business sense. Hundreds of companies have not only made commitments like these, but reaffirmed their support for the Paris Agreement and U.S. policies that address climate change.

Businesses like Google are taking climate action because they understand the costs of inaction and see the economic benefits of a clean-energy economy. Google’s commitment to 100 percent renewable shows that leading companies are committed to making long-term investments that are good for the environment, their consumers and their bottom lines.

Addressing climate change will require tremendous investment in low- and zero-carbon energy technologies. Estimates are as high as $1 trillion per year through 2030.

Some of that investment must be in carbon capture technology, which can reduce emissions from both the power and industrial sectors. Carbon capture could provide 13 percent of global emissions reductions through 2050.

Innovative corporate partnerships will play a critical role in launching this investment. That’s because partnerships can bring together the right combination of resources, talent, and experience and combine technical knowhow with business-oriented analyses of commercial viability. To solve our emissions challenges, innovation will be key, not just in technology, but also in investment models and business partnerships.

NET Power

One example of an innovative corporate partnership that is bringing carbon capture technology into the field is the NET Power demonstration project in La Porte, Texas.

The NET Power project, which is expected to come online in 2017, will be the first in the world to use supercritical CO2 (when the gas has the density of a liquid), instead of steam, to drive a turbine. It will make electricity from natural gas using patented technology that captures almost all carbon- and non-carbon emissions at no additional cost: it has equipment costs and fuel usage that are equivalent to or better than best-in-class conventional natural gas combined cycle power plants without carbon capture. The technology is also capable of very low or no levels of water usage.

Each partner in the project brings a unique competency: 8 Rivers is the technology expert, contributing its invention and engineering oversight capabilities. Exelon Corporation contributes its sizeable network of business contacts, financial resources, project development support, and operations and maintenance expertise and may adopt the technology for commercial use in its operations. CB&I provides engineering, procurement and construction services, as well as financial assistance and experience with sales. Finally, Toshiba provides specialized expertise in high-pressure turbines.

During a recent C2ES webinar on financing carbon capture, some of the partners explained why the collaboration model works better than the venture capital model of investment in this case.

From the investor perspective, corporate partnerships are viewed as more mature transactions “both as an investment opportunity, but also as a technology that we think is ready for us to deploy when the time comes,” said David Brown, senior vice president of federal government affairs and public policy at Exelon.

From the developer perspective, NET Power CEO Bill Brown said, “Normally, too many startup firms don’t have market definition as a critical part of their first stage. They should. By reaching out to the customers [like Exelon] to begin with, we were able to get a very good focus on the market.”

What’s Next

More capital is being committed to a low-carbon future:

A year ago, 20 nations launched Mission Innovation to double their cumulative annual spending on clean energy research from $10 billion to $20 billion, with CO2 capture utilization and storage being one of the “R&D Focus Areas.”

As a complement, leading entrepreneurs launched the Breakthrough Energy Coalition and pledged to invest billions in early-stage clean energy technology.

On Nov. 4, the CEOs of 10 oil and gas companies announced the Oil and Gas Climate Initiative which aims to direct $1 billion over the next decade to accelerate the development of technologies that could reduce greenhouse gas emissions on a significant scale, including carbon capture, use and storage.As this private capital is mobilized, innovative corporate partnerships can combine business experience and commercial viability with government contributions to research and development to advance the commercial deployment of clean energy technology quickly.

The potential benefits for accelerated clean energy technology deployment are substantial. By reducing the cost of capture, the NET Power project may create an opportunity for U.S. innovation to help achieve emissions reductions globally.

Also, reducing the cost of capture lets us explore re-use of CO2, an area of increasing focus. Launched in January, the Global CO2 Initiative aims to enable the capture and re-use of 10 percent of annual global CO2 emissions by converting them into useful products. Its new roadmap highlights the potential for CO2 reuse in concrete, fuels (methane and liquid fuels), carbonate aggregates, polymers, and methanol.

To solve our emissions challenges, innovation will be key, not just in clean energy technology, but also in investment models and business partnerships.

I want to thank Doctor (Daniel) Schrag and the Harvard University Center for the Environment for inviting me to speak. And my thanks to all of you for coming to listen. Dan and I have been talking for some time about my coming up from Washington to do a lecture. I’m not sure either one of us had quite this backdrop of current events in mind.

What a week. I know folks are still processing what happened seven nights ago and what happens next. The truth is: Elections have consequences. That’s why it’s so important to exercise our right to vote.

It’s too soon to tell exactly what steps the next administration will take on climate and energy policy. The rhetoric of campaigning doesn’t always exactly match the realities of governing. We hope President-elect Trump and his advisers take some time to study the issues and hear a broad range of perspectives.

They’ll find that a majority of Americans support stronger climate action.

They’ll find that many cities and states are promoting energy efficiency, deploying renewable energy, and supporting alternative fuel vehicles.

And they’ll find that business leaders recognize the rising costs of climate impacts, and also see opportunities in clean technologies. You could say they want to “win” in the growing global clean-energy economy.

This evening, I want to explore three questions:

What are the climate and energy realities facing this president, and all of us?

What might we expect from a Trump Administration?

And what can we do to promote environmentally responsible policies in the years ahead?

To put my remarks in context, it helps to know a little bit about my organization C2ES – the Center for Climate and Energy Solutions. C2ES is a nonpartisan, nonprofit think tank. We work to forge practical solutions to climate change. Our mission is to advance strong policy and action to reduce greenhouse gas emissions, promote clean energy, and strengthen resilience to climate impacts.

We believe a sound climate strategy is essential to ensure a strong, sustainable economy. I want to underline that. It’s a conviction our think tank was founded on. And it’s a message I hope you’ll leave here with tonight: Environmental and economic progress go hand in hand.

I came to C2ES a little over two years ago because of its reputation:

As a Trusted Source of impartial information. We rank regularly among the top environmental think tanks in the world.

As a Bridge-Builder. We bring city, state, and national policymakers together with businesses to achieve common understanding.

As a Policy Innovator. We explore market-based solutions and other practical policy approaches.

And as Catalyst for Business Action. We work with Fortune 500 companies to strengthen business support for climate policy.

The idea of bringing disparate groups together is part of our DNA. Here are four quick examples:

At the international level, C2ES brought together negotiators from two dozen countries for a series of private discussions that helped lay the groundwork for the landmark Paris Agreement.

We recently partnered with The U.S. Conference of Mayors to create the Alliance for a Sustainable Future, whose goal is to strengthen public-private cooperation.

And our multi-sectoral Business Environmental Leadership Council is the largest U.S.-based group of companies devoted solely to addressing climate change.

That’s who we are and where I’m coming from. Now, let’s look at the some of the realities facing the next administration.

Realities on the Ground

Depending on your point of view, this was either a “Change Election” or a “Fear of Change Election.” What I can tell you is that it wasn’t a “Climate Change Election” because nobody was talking about it.

Climate change didn’t come up once in any of the presidential debates. The only question about energy policy came from that guy in a red sweater, Ken Bone. Climate change was not top of mind in the voting booth. Asked before the election where climate change ranked among their concerns, voters put it No. 19 out of 23.

But when asked where they stand, the majority of Americans – of all political viewpoints -- support climate action. A majority of Democrats, Independents, and Republicans support funding renewables research, providing tax rebates for energy-efficient vehicles or solar panels, and regulating carbon dioxide as a pollutant.

Americans support climate action because they understand that climate change is occurring, and that human actions are largely responsible.

Here are a few more facts:

2014 was the hottest year globally ever recorded. Until 2015. 2016 has been even hotter.

Climate change is a matter of science, but also a matter of dollars and cents. This year, the United States experienced a dozen billion-dollar disasters.

Climate impacts like rising sea levels and more frequent and intense heatwaves, downpours, and droughts threaten the way we all live our lives.

Another reality is that our energy landscape has already changed. This isn’t your grandfather’s energy system. When I was born, the United States didn’t get any commercial power from natural gas or nuclear. Zero. Now those two sources together are responsible for more than half of our electricity.

Let’s talk a minute about those two. First, natural gas. Thirty years ago, before many of you were born, it was illegal to use natural gas in a power plant. Now it makes up more than a third of U.S. electricity supply. Coal makes up another third of our energy mix, down from about half 10 years ago. This change is due in large part to market forces. Natural gas is inexpensive, so utilities have switched to if from coal.

These same market forces are posing a challenge for nuclear energy. Nuclear is responsible for more than 60 percent of zero-carbon electricity in the United States – It’s the biggest source. A number of reactors have been closing prematurely, which could make it even harder to meet our climate goals.

Renewables have been surging as costs have plummeted. Wind and solar generation have grown nearly twelve-fold since 2005. That’s nearly eight times greater than expected.Thanks to diversifying our energy mix, and improving energy efficiency, power sector emissions have fallen by more than 20 percent in the past 10 years. We’re moving in the right direction. The challenge will be to keep doing so.

What to expect

What can we expect from the new administration? I’ve been getting two questions for the past week: What will happen to the Clean Power Plan? And what will happen with the Paris Agreement? So let’s talk about those.

Every new president usually halts regulations that are in the process of being formulated, so we can expect that. For a final regulation, like the Clean Power Plan, a simple stroke of the pen can’t undo it. It’s a process. First, they’d have to do a rule-making, which requires public comment. Then, they'd need to come back with an alternative plan. That’s because under previous Supreme Court rulings, EPA is still under a legal obligation to reduce greenhouse gas emissions. It’s mandatory. They’ll be sued if they don't.

The Clean Power Plan is currently in the courts. So we could find ourselves replacing the current legal uncertainty with new and different legal uncertainty.

On a positive note, the Clean Power Plan prompted a lot of state environmental officials, public utility regulators and other stakeholders to sit down together for the first time to talk about electricity reliability, efficiency and affordability. We hope those conversations bear fruit.

There’s no doubt that the Clean Power Plan could reduce power plant emissions faster and further than no plan at all. But progress has already been made and I think there are ways it can continue.

Mr. Trump has also said he wants to “cancel” the Paris Agreement. The bottom line is that he could legally pull the U.S. out of it. Let’s think through, practically, how that would work out for us. Consider that virtually every country in the world has committed to taking climate action. The Paris Agreement is a bottom-up, flexible framework. It relies on peer pressure. If we want to hold other countries accountable, we have to hold up our end. If we walk away from our commitments, we also give up being a player in the innovative energy and transportation technologies that can create U.S. jobs. China, Brazil and the US led the world last year in employment in renewable energy.

The Paris Agreement has widespread support among the business community. Eleven major companies we work with, including Berkshire Hathaway Energy, Microsoft, National Grid, and Shell, signed onto a C2ES statement applauding governments for bringing the agreement into force so quickly this month. Businesses say the agreement provides long-term direction, promotes transparency, and addresses competitiveness.

Because the Paris Agreement is flexible, there are a lot of ways for an individual country to tailor its efforts. It was also designed to be durable – It can survive shifts in political currents. The nearly 100 other countries that have already ratified it are reducing emissions for a variety of reasons, including economic opportunities and health benefits to their people. I expect they will remain committed to moving forward.

As for what else we can expect – we’ll have to wait and see. From opening up public lands and offshore areas to more drilling to re-assessing pipelines to appointing agency leaders with very different priorities from the past eight years, we’re going to see changes.

What we can do

So that brings me to my final question tonight: What can we do to promote environmentally responsible policies in the years ahead? Let’s look at four vantage points – federal, state, local, and business.

First: The executive branch has been the focus of climate action for a number of years. That’s going to change. I want to posit that it may be time to return our focus on the legislative branch. Three areas where bipartisan support already exists are: building infrastructure, incentivizing carbon capture technologies, and preserving the nuclear fleet.

Both presidential candidates talked about the need to modernize our aging infrastructure. That’s not just roads and bridges. We need to modernize our electric grid to move renewable power from where it’s generated to where it’s needed. We need to improve the natural gas pipeline system to reduce leaks. And we need to expand electric vehicle charging. The electric grid should be able to accommodate clean energy technologies like energy storage, time-of-day pricing, and grid-to-vehicle interfaces.

Millions of miles of pipes carrying drinking water and wastewater are nearing end of life. And it takes a lot of energy to move a gallon of water. The nation’s utilities lose about $2.6 billion dollars annually from trillions of gallons of leaked drinking water.

Infrastructure projects can also help communities be more resilient to extreme weather, make communities more livable, increase property values, and save energy and water. And, of course, infrastructure projects create jobs.

The second area where we could make progress is carbon capture, use and storage, or CCUS. Some of you might be skeptical about this as “clean coal.” The truth is, there’s no scenario for achieving the emission cuts we need globally without carbon capture. We need to keep emissions out of the air not only from coal and natural-gas power plants around the world, but also the industrial sector like steel, chemical, and cement plants. The industrial sector is responsible for more than 20 percent of U.S. greenhouse gases.

Right now, there are bipartisan bills in the House and Senate that would spur carbon capture technology. Imagine Senate Majority Leader Mitch McConnell and Hillary Clinton’s running mate, Senator Tim Kaine, on the same bill. It’s true.

A third area where we might get some bipartisan agreement is preserving our nuclear fleet. There’s a bill right now that both Senators Whitehouse and Inhofe support. From a climate perspective, it doesn’t make sense to prematurely close nuclear plants when, in the short- and medium-term, they cannot realistically be replaced by zero-emission power sources. Keeping these reactors operational also buys us time to address energy storage and transmission challenges to support more renewable generation.

Let me add one more area as a possibility where we might see some agreement at the federal level: helping the communities most affected by the transition to clean energy. Remember that market forces – not regulations -- have mainly been driving the decline of coal. And natural gas will continue to displace coal in our power generation fleet at current prices. There are no plans for new coal-fired power plants in the United States. What coal communities need is opportunities for new jobs. The United States could be world leaders in manufacturing clean energy and transportation technologies. More Americans work now in the solar industry than work in either oil & gas extraction or coal mining. It will take a concerted effort involving education and training, but we have to help.

Moving to the states, which have always been the incubators of policy, we’ve seen a lot of progress on clean energy. Twenty-nine9 states require electric utilities to deliver a certain amount of electricity from renewable or alternative energy sources. Ten states that are home to a quarter of the US population already have a price on carbon and are successfully reducing emissions. Those states are California and the nine Northeast states, including Massachusetts, in the Regional Greenhouse Gas Initiative (RGGI). RGGI has added $243 million in value to Massachusetts’ economy. Massachusetts has also been named the most energy efficient state in the country for the last six years.

Every state has either an operational wind energy project, a wind-related manufacturing facility, or both. Some of the biggest wind energy producers are Texas and Iowa. They won’t want to reverse the economic prosperity they’ve seen as a result. America’s first offshore wind farm has just come online off Rhode Island, launching new industry with the potential to create jobs in manufacturing and the marine trades.

Time and again, we’ve seen leadership at the state level and I expect that will continue.

On environmental policies, so much often comes down to the local level. Many cities have already taken the ball and are running with it. They’re improving the energy efficiency of buildings, deploying cleaner energy, and encouraging cleaner transportation.

Cities see the real and rising risks of climate change. They’re dealing with the impacts now. They also see opportunities to for energy and transportation systems that are cleaner and more efficient than today. To keep their efforts moving forward, partnership and collaboration will be key, especially between cities and companies.

That’s why we at C2ES recently launched a partnership with The US Conference of Mayors called the Alliance for a Sustainable Future. The main goal is to spur public-private cooperation on climate action and sustainable development in cities. Santa Fe Mayor Javier Gonzales is leading the steering committee. Founding sponsors include JPMorgan & Chase Co., Duke Energy, and AECOM, and the mayors of Austin, Des Moines, New York City, and Salt Lake City.

Finally, business leadership has been and will continue to be crucial in transitioning to a clean energy and clean transportation future. A C2ES study found more than 90 percent of the companies in the S&P Global 100 Index see climate change as a business risk. They see rising sea level and more frequent and extreme heat waves, downpours and drought damaging and disrupting their facilities and operations, supply and distribution chains, and water and power supplies.

More than 150 companies -- from Alcoa to Xerox -- signed the White House American Business Act on Climate Pledge. They committed to cutting emissions, reducing water usage, and using more renewable energy. Business leaders see opportunities in clean energy and transportation.

Here’s another thing to think about, the power of the consumer. In the past year, three in 10 Americans say they’ve rewarded companies for taking steps to address climate change.

The reality is that we have strong momentum in the right direction. Our economy has begun decarbonizing. Power sector emissions are down, thanks largely to market forces and to incentives for renewable energy that have strong bipartisan support. Many cities, states and companies, along with a number of congressional Republicans, want to keep that momentum going. Smart investments and technological innovation have started America on a clean-energy transition. Building on that momentum will protect communities from rising climate damages and will contribute to strong and sustained economic growth.

The longer we wait to address climate change, the costlier it will be. I urge all of you to work at the local and state level to support common-sense policies that lead us toward a sustainable future.

Even in an election year, there are areas of energy policy where leaders of both parties and stakeholders from diverse sectors of the economy can find common ground. Encouraged by the landmark Paris Agreement in December 2015 and motivated by the need to avoid stranded assets and preserve jobs in the power sector, policymakers took seriously the challenge of accelerating deployment of carbon capture, use and storage (CCUS or carbon capture). Midway through the year, the International Energy Agency issued a report concluding that financial and policy support for carbon capture is not at a sufficient level to ensure an adequate pipeline of carbon capture projects that will enable the world to stay on track to meet mid-century goals of keeping global warming within 2 degrees Celsius of pre-industrial levels.[1]Bipartisan proposals that are before Congress this year would encourage CCUS technology. State political leaders also supported carbon capture in notable ways this year.

H.R. 4622, the Carbon Capture Act

On Feb. 25, 2016, Rep. Mike Conaway (D-Texas) introduced H.R. 4622, the Carbon Capture Act, a bill to extend and expand Section 45Q, which is the primary tax credit for the use of carbon dioxide in enhanced oil recovery (CO2-EOR), a form of tertiary production.[2] In the United States, carbon dioxide has been safely used in commercial enhanced oil recovery for more than 40 years. The United States produces about 4 percent of its oil through CO2-EOR. However, most of the carbon dioxide used is from naturally occurring underground reservoirs instead of from man-made sources. In addition to the climate benefits of reducing the amount of carbon dioxide vented into the atmosphere, CO2-EOR maximizes production from existing oil fields and may displace more carbon-intensive imported crude oil.

Rep. Conaway’s bill has 45 co-sponsors: 30 Republicans and 15 Democrats. These co-sponsors hail from 24 states and all regions of the country. This broad support challenges the notion that energy policy debates must be polarized and partisan.

H.R. 4622 provides four changes to 45Q. First, it would remove the existing cumulative cap of 75 million tons of CO2 and make the tax credit permanent. With less than half of the credits left for new projects to use, there is too much uncertainty for carbon capture project developers to secure financing.[3] By making the tax credit permanent, the bill aims to establish certainty that would enable carbon capture project financing.

Second, the bill would increase the value of the credit per ton of CO2. Under current law, there is a credit of $10 per ton of CO2 for EOR and $20 per ton of CO2 for saline storage. Rep. Conaway’s bill would increase these values to $30 for both EOR and saline storage. These increases would ramp up over time reaching their full value in 2025.

Third, the bill would lower the threshold for qualifying facilities to 150,000 tons of CO2 for both power plants and industrial facilities. Industrial facilities that emit CO2 include ethanol plants; natural gas processing facilities; steel, cement, fertilizer and chemical plants; hydrogen production plants, and refineries.[4]Capture of industrial CO2 emissions is critical because the sector accounts for almost 25 percent of global greenhouse gas emissions.[5]

For these industrial sources, the cost to capture CO2 is often lower than for power plants. Technology to separate the CO2 stream has been used in natural gas processing for decades. The by-product CO2 stream is often of higher purity, i.e. less mixed with other gases, than power plant emissions. Importantly, there is no alternative to CCUS to achieve deep decarbonization in the industrial sector because production of CO2 is often an inherent part of the chemical or industrial process. By lowering the threshold for industrial sources of CO2, the bill aims to incentivize investment in industrial carbon capture projects.

Finally, the bill would allow transferability of the credit within the chain of CO2 custody. This change would allow entities with little or no tax liability to benefit from the incentive by transferring it to entities with the ability to use the credit.

In the Senate, companion legislation was offered on April 12, 2016, by Sens. Heidi Heitkamp (D-ND) and Shelly Moore Capito (R-WV) in the form of an amendment to the Federal Aviation Administration (FAA) reauthorization bill.[6] The amendment had bipartisan support from two Democrats and five Republicans.[7]While the amendment was voted into the tax title of the FAA bill, the tax title was ultimately dropped for other reasons.[8]

S. 2012, Energy Policy Modernization Act

On Apr. 20, 2016, the Senate passed a broad energy bill authored by Senate Energy Committee Chairwoman Lisa Murkowski (R-Alaska) and Ranking Member Maria Cantwell (D-WA).[9] The bill was approved 85-12, demonstrating bipartisan support. Section 3403 of the bill authorizes a new research, development and demonstration program at the U.S. Department of Energy (DOE) on CCUS technology.[10] Section 3404, added by Sens. Heitkamp and Capito and co-sponsored by six Democrats and four Republicans,[11]directs the DOE to report on long-term contracts to provide price stabilization support for carbon capture projects, a mechanism that is often referred to as a Contract for Differences (CfD).[12]The DOE report would identify the costs and benefits of entering into CfDs and would outline options for how such CfDs could be structured and describe regulations that would be necessary to implement such a program.[13]

North American Climate, Clean Energy, and Environment Partnership

On Jun. 29, 2016, President Barack Obama, Canadian Prime Minister Justin Trudeau, and Mexican President Enrique Peña Nieto announced the North American Climate, Energy, and Environment Partnership.[14]The three nations aim to achieve 50 percent clean power generation by 2025, including through CCUS technology. One of the goals identified in the White House Action Plan is leveraging participation in Mission Innovation[15]by identifying joint R&D initiatives to advance CCUS technology. By highlighting the role of CCUS in achieving deep decarbonization in North America, there is a renewed opportunity to focus on how the three nations can work together.

S. 3179, the Carbon Capture Utilization and Storage Act

On July 13, 2016, Sens. Heitkamp and Sheldon Whitehouse (D-RI) introduced S. 3179, the Carbon, Capture, Use and Storage Act, along with co-sponsoring Sens. Jon Tester (D-MT), Brian Schatz (D-Hawaii), Cory Booker (D-NJ), Tim Kaine (D-VA), and Bob Casey (D-PA).[16]Republican co-sponsors include Sens. Capito and Blunt and Senate Majority Leader Mitch McConnell, putting the Kentucky Republican and some of the Senate’s leading advocates for climate action on the same side.

The Senate bill allows forms of CO2 utilization beyond EOR to be eligible for the tax credit. Under the bill, utilization is expanded to include the fixation of CO2 “through photosynthesis or chemosynthesis, such as through the growing of algae or bacteria,” chemical conversion of CO2 to a material or chemical compound in which CO2 is securely stored, or the use of CO2 for “any other purpose for which a commercial market exists.”[17]A leading example of carbon dioxide use beyond EOR is algae biofuels.

The Senate bill would extend the tax credit for seven years and would allow the credit to be claimed for 12 years.[18]For new facilities, the Senate bill increases the value per ton of CO2 of the tax credit to $35 for EOR and $50 for geologic storage.[19]The bill lowers the threshold for qualifying facilities to 100,000 tons for industrial facilities.[20]Finally, the Heitkamp-Whitehouse bill provides the tax credit to the owner of the carbon capture equipment.[21]

Developments this year build on previous efforts to promote carbon capture. On June 24, 2015, Rep. Ted Poe (R-Texas) and Rep. Mike Thompson (D-CA) re-introduced H.R. 2883, the Master Limited Partnerships Parity Act, which would extend the publicly traded partnership ownership structure available for certain oil and gas activities to renewable energy development.[22]The bill would also extend the tax treatment to carbon capture for EOR or other secure geologic storage. The bill was co-sponsored by six Democrats and six Republicans.[23]

Additionally, on Nov. 19, 2015, Sens. Michael Bennet (D-CO) and Rob Portman (R-OH) introduced S. 2305, the Carbon Capture Improvement Act, which would allow the use of tax-exempt private activity bonds (PABs) issued by state or local governments to finance carbon capture projects.[24]

From the perspective of project developers, the extension and expansion of Section 45Q will do the most to accelerate the deployment of CCUS technology, although the MLP and PAB efforts will play a critical role.[25]Like with other low- and zero-carbon energy technologies such as wind and solar, multiple and complementary incentive policies are often more effective in enabling investment to drive deployment than any single incentive policy.

State Policy

A number of states have demonstrated leadership on carbon capture policy in 2016 by voicing growing support for federal incentives. In February, the National Association of Regulatory Utility Commissioners (NARUC) adopted a resolution urging Congress and the Obama Administration to support state efforts on CCUS including CO2-EOR.[26]In June, the Western Governors’ Association followed up on a June 2015 resolution supporting CO2-EOR[27]with a letter of support for federal incentives for this technology.[28]In July, Montana Governor Steve Bullock released Montana’s Energy Future Blueprint, which highlights the need for federal and state support of accelerated commercial deployment of CCUS technology.[29]Last fall, the Southern States Energy Board also issued a resolution supporting federal incentives for CO2-EOR.[30]

Conclusion

Despite encouraging progress at the federal and state levels, formidable challenges lie ahead. Developers of carbon capture projects face serious obstacles in obtaining financing. Deployment of carbon capture technology is not on track to meet our climate goals. Fewer than half of the Intergovernmental Panel on Climate Change models were able to stay within a 2-degree scenario without CCUS.[31] Without carbon capture, the costs of climate change mitigation increase by 138 percent.[32] Carbon capture projects are capital-intensive and require long lead times to reach commissioning. In this context, the need for action is urgent.

What we have seen this year is that U.S. political leaders are able find common ground on energy policy where the goals of emissions reduction, energy security, and economic development converge. Looking forward, there is reason to hope that through working together on carbon capture policy this year, elected officials on both sides of the aisle have developed working relationships and built bridges that will enable continued action on climate in the next administration.

[3] The IRS announced that almost half of the credits available under the cumulative cap have been claimed. U.S. Internal Revenue Service, Notice 2015-44, Credit for Carbon Dioxide Sequestration: 2015 Section 45Q Inflation Adjustment Factor (2015), available athttps://www.irs.gov/pub/irs-drop/n-15-44.pdf

[4] In the U.S., there are states and regions that will have candidates for carbon capture at lower-cost industrial facilities before they do in the power sector.

[10] Section 3403 establishes a new coal technology program, which includes programs for research and development, large-scale pilot projects, demonstration projects, and co-fired biomass-coal projects. Id. The section authorizes $632 million annually from 2017 – 2020, and $582 million in 2021. DOE continues to do substantial work and focus domestic and international policy efforts on CCUS. An important domestic DOE initiative is the creation of seven Regional Carbon Sequestration Partnerships to help develop infrastructure and regulations for CCUS technology and sequestration. An important international DOE initiative is the Carbon Sequestration Leadership Forum, a ministerial-level panel that meets to advance CCUS RD&D worldwide.

[13] As context, carbon capture projects often face steep financing challenges. This is because one of the main uses of CO2 that is in commercial operation today is CO2-EOR and the revenue from the sale of CO2 for EOR is dependent on volatile oil prices. The futures market for oil prices does not enable the type of commercial hedge that is needed to finance these projects. A CfD would address that market weakness by providing a reference oil price that would remain the same over the duration of the contract. When oil prices are above the reference oil price, the developer would pay the U.S. Treasury. When oil prices fall below the reference oil price, the Treasury would pay the developer. By providing certainty, a Federal CfD would make it easier for carbon capture projects to reach financial close.

[15] Mission Innovation is an initiative that was launched in Paris in November 2015. Through this initiative, 20 nations have committed to doubling their clean energy R&D investments over five years. The Breakthrough Energy Coalition is an independent initiative spearheaded by Bill Gates that launched simultaneously with Mission Innovation. Through the Breakthrough Energy Coalition, a global group of private investors have committed to commercializing the research that is funded by Mission Innovation.

[18] S. 3179, 114th Cong. § 2 (2016), providing a new Section 45Q(a)(3) and 45Q(d)(1)(A). The determination of eligibility is based on the date that a project commences construction. This provides greater certainty for investors than the existing cumulative cap of 75 million tons of CO2 but not as much certainty as a permanent tax credit.

[19] S. 3179, 114th Cong. § 2 (2016), providing a new Section 45Q(b)(1). The value of the credit ramps up over time. The Senate bill does not increase the value of the credit for existing facilities. S. 3179, 114th Cong. § 2 (2016), providing a new Section 45Q(a)(1)-(2).

[20] S. 3179, 114th Cong. § 2 (2016), providing a new Section 45Q(d)(1)(B). For power plants, the threshold for power plants remains at 500,000 tons. This would exclude some smaller demonstration carbon capture projects at power plants. The threshold is 25,000 for projects that utilize CO2.

[21] S. 3179, 114th Cong. § 2 (2016), providing a new Section 45Q(e)(5). Like H.R. 4622, this would enable rural electric cooperatives without tax liability to benefit from the incentive because the incentive could be claimed by a third-party that puts up the investment funds in the equipment. This would reduce the cost of capital for these projects.

[24] Access to tax-exempt private activity bonds will provide project developers an important tool in a broader toolkit of measures needed to help attract private investment and finance carbon capture projects. The benefits to consumers and businesses of PABs include their tax-exempt status and the fact that they can be paid back over a longer period of time. S. 2305, 114th Cong. (2016), available athttps://www.congress.gov/bill/114th-congress/senate-bill/2305

[25] MLPs and PABs will be especially helpful for electric power generation and some industrial sectors where the costs of carbon capture remain high.

International negotiators are gathering in Kigali, Rwanda, with the goal of phasing down one of the most potent and rapidly expanding greenhouse gases affecting the climate.

Momentum is building for taking action on hydrofluorocarbons (HFCs), a family of industrial chemicals used worldwide in air conditioners, refrigeration, foam products, and aerosols.

On the sidelines of the recent U.N. General Assembly, more than 100 nations signed a declaration calling for an amendment to the Montreal Protocol to ambitiously deal with HFCs, with an early freeze date for developing countries and an early first reduction step for developed countries.

To jump start the transition away from HFCs, 16 donor nations have offered $27 million in new and additional money for use by developing countries in limiting HFC use in 2017. Donor countries are also committing to support the longer-term phase-down costs under the Montreal Protocol’s Multilateral Fund.

In an unprecedented move, a group of philanthropists (19 foundations and private individuals including Bill Gates and Tom Steyer) have offered an additional $53 million to developing countries to support efforts to move from HFCs to more energy-efficient alternatives.

Action on HFCs is the single most significant step nations can take this year to advance the goal established in the Paris Agreement of limiting global temperature increases to well below 2 degrees Celsius. Estimates are that an ambitious HFC amendment would reduce global warming by as much as 0.5 degrees by the end of the century.

While momentum for an ambitious agreement this year is strong and building, it is by no means assured. Even with more than 100 nations on board, reaching an international consensus in Kigali will not be easy.

A large number of developed and developing countries have supported a developing country freeze in HFC use beginning around 2021, but India has supported a 2030 freeze date and Gulf Cooperation Council countries proposed a 2028 freeze.

Issues under discussion include the costs and availability of alternatives, the role and timing of patent protections, the rules governing support of projects under the Multilateral Fund, and the need for updated standards for the safe handling and use of more flammable refrigerant alternatives. While there is general support for incorporating enhanced energy efficiency into the transition away from HFCs, there are questions about the ways to achieve this objective.

Solutions are on the table for all of these issues. Given progress to date and the financial resources now available to developing countries to support an ambitious HFC amendment, agreement in Kigali is well within reach. The costs of acting to reduce HFCs are small compared to the very real and present costs of inaction to limit changes to our climate.